This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

Report No. IN 97-25

INTERNATIONAL ACTION

August 21, 1997

FCC APPROVES MCI/BRITISH TELECOM MERGER
SUBJECT TO CERTAIN CONDITIONS

The Federal Communications Commission has approved the merger of MCI
Communications Corporation (MCI) and British Telecommunications plc (BT) subject to
conditions and safeguards that ensure the merger will enhance competition in the United
States. In approving the merger, the Commission relied upon the fact that the U.S.-U.K.
route is one of the most competitive in the world because of substantial liberalization and
deregulation of the U.S. and U.K. telecommunications markets. The Commission found that
the transfer of control of MCI's licenses and authorizations to BT is in the public interest
given commitments made and actions taken by MCI and BT.

The Commission concluded that the following commitments and developments ensure
that the merger will have procompetitive effects and that competition on the U.S.-U.K. route
will set a standard for the world:

First, BT recently agreed to accept a settlement rate of 7 cents per minute, one of the
lowest in the world, to terminate U.S.-outbound calls in the United Kingdom.

Second, MCI has committed to support the equal access initiatives of the European
Union. Under equal access, customers would have the option of pre-subscribing to carriers
other than BT for U.K.-outbound long distance and international calls. Currently, such
customers must dial special access codes on a call-by-call basis to use BT's competitors. MCI
also acknowledged that the FCC could take enforcement action against MCI if BT fails to
comply with European Union equal access requirements as implemented by the United
Kingdom. Accordingly, the Commission conditioned its grant of the license transfer upon
MCI's non-acceptance of BT traffic originated in the United Kingdom to the extent BT is
found to be in non-compliance with U.K. regulations implementing any European Union equal
access requirements.

Third, BT and MCI have committed to the European Commission to make substantial
capacity on the TAT-12/13 transatlantic submarine cable available to newly licensed
competitors. In addition, MCI has agreed to provide these new competitors with adequate
matching backhaul capacity in the United States.

Fourth, BT and the U.K. Government recently announced that the U.K. Government
will redeem its "special share" in BT. The U.K. Government's decision to sever all
ownership ties with BT provides additional assurance that BT will not enjoy any special
advantage over other carriers.

The Commission also found that, given BT's market power in the United Kingdom,
MCI should be regulated as a dominant carrier on the U.S.-U.K. route. The Commission
waived the application of the dominant carrier requirements, however, until new rules are
adopted and made effective in the Foreign Participation proceeding implementing the Basic
Telecommunications Agreement concluded in the World Trade Organization on February 15,
1997. The Commission required MCI in the interim to continue to comply with the
safeguards imposed by the Commission in its July 1994 decision approving BT's 20 percent
investment in MCI.

In its action today, the Commission also agreed to transfer control of MCI's Direct
Broadcast Satellite (DBS) license to BT, subject to any final rules adopted in proceedings
relating to DBS licenses and the outcome of pending applications for review of the order
granting MCI's DBS license.

Finally, the Commission conditioned its approval upon compliance with the provisions
of the agreement of May 22, 1997, among BT, MCI, the U.S. Department of Defense, and the
Federal Bureau of Investigation. The agreement addresses the national security and law
enforcement concerns of the Executive Branch.

Action by the Commission August 21, 1997, by Memorandum Opinion and Order
(FCC 97-302).